IRS Substitute Tax Returns

IRS Substitute Tax ReturnA taxpayer may fail to file their tax return for a number of reasons: a death in the family, financial hardship, depression, overwhelming life changes or simply procrastination or apathy.

No matter the reason, you are still required by law to file your tax return, whatever reason you may have for not filing. Eventually you will have to file the return, or the IRS may do it for you. If you fail to file a tax return in a timely manner the IRS will file a substitute return in order to determine a dollar amount for which to take collection action.

The IRS substitute tax return takes into account only income that they can calculate from W2’s and 1099’s. They have no records of deductions, exemptions, expenses or losses. If you fail to file a tax return and the IRS files a substitute tax return for you, often their calculation does not reflect the true amount you owe because they do not have all the proper financial documentation. The IRS encourages filing your own return even if they have already filed a substitute tax return.

The IRS will adjust your account to show the proper balance if they believe the return you filed is true and correct.

On a rare occasion it may not be necessary to submit a separate return and you may be able to accept the amount the IRS calculated. The best way to determine if you need to re-file is to hire a tax professional to review your financial records and correspond with the IRS on your behalf. Often you can avoid paying additional or unnecessary tax. On occasion the IRS will forgive a penalty or two if you show initiative by hiring a professional and beginning the resolution process.

The IRS is responsible for collecting accurate tax amounts and they are often willing to work with taxpayers who are attempting to settle their tax bill. Collection action and penalties can be very harsh if the IRS believes you are trying to ignore your tax liability.

The first step to complying with the IRS is to file any and all delinquent tax returns. If the IRS has already assessed your tax amount or filed a substitute return, it can still be adjusted to show the true and accurate amount.

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